Malat v. Comm'r of Internal Revenue
| Decision Date | 31 May 1960 |
| Docket Number | Docket Nos. 63976-63979. |
| Citation | 34 T.C. 365 |
| Parties | WILLIAM MALAT AND ETHEL MALAT, ET AL.,1 PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
George T. Altman, Esq., for the petitioners.
Richard W. Janes, Esq., and Leo K. O'Brien, Esq., for the respondent.
Held, petitioners' motions for judgments against themselves to be based upon findings of fact they concede, are denied, and, since petitioners offered no evidence, judgments will be rendered based upon petitioners' ;failure of proof.
When these consolidated dockets were called for trial neither petitioners nor respondent offered any evidence. Petitioners filed motions in all of these dockets which began with the following language:
MOTION
Petitioners move the court for judgment on the pleadings, with the resulting deficiency to be determined under Rule 50, * * *
Respondent determined deficiencies in income tax and additions to tax, as follows:
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¦ ¦ ¦ ¦ ¦Additions ¦
¦ ¦ ¦ ¦ ¦to ¦
+------+-----------------------------+-----------------+----------+-----------¦
¦Docket¦Petitioner ¦Year ¦Deficiency¦tax, sec. ¦
+------+-----------------------------+-----------------+----------+-----------¦
¦No. ¦ ¦ ¦ ¦294(d)(2) ¦
+------+-----------------------------+-----------------+----------+-----------¦
¦ ¦ ¦ ¦ ¦I.R.C. 1939¦
+------+-----------------------------+-----------------+----------+-----------¦
¦63976 ¦William Malat and Ethel Malat¦1950 ¦$14,542.59¦$1,003.26 ¦
+------+-----------------------------+-----------------+----------+-----------¦
¦ ¦ ¦1951 ¦12,746.75 ¦1,092.46 ¦
+------+-----------------------------+-----------------+----------+-----------¦
¦63977 ¦Ben Lesser and Lily Lesser ¦Taxable year ¦12,923.84 ¦1,010.01 ¦
¦ ¦ ¦ended ¦ ¦ ¦
+------+-----------------------------+-----------------+----------+-----------¦
¦ ¦ ¦Nov. 30, 1950. ¦ ¦ ¦
+------+-----------------------------+-----------------+----------+-----------¦
¦ ¦ ¦Taxable year ¦11,253.70 ¦None ¦
¦ ¦ ¦ended ¦ ¦ ¦
+------+-----------------------------+-----------------+----------+-----------¦
¦ ¦ ¦Nov. 30, 1951. ¦ ¦ ¦
+------+-----------------------------+-----------------+----------+-----------¦
¦63978 ¦Louis Rudman and Shirley ¦1950 ¦15,225.83 ¦1,424.60 ¦
¦ ¦Rudman ¦ ¦ ¦ ¦
+------+-----------------------------+-----------------+----------+-----------¦
¦ ¦ ¦1951 ¦12,950.63 ¦1,142.63 ¦
+------+-----------------------------+-----------------+----------+-----------¦
¦63979 ¦Louis Lomas and Claire Lomas ¦1950 ¦18,083.77 ¦1,362.28 ¦
+------+-----------------------------+-----------------+----------+-----------¦
¦ ¦ ¦1951 ¦9,958.91 ¦1,186.22 ¦
+-----------------------------------------------------------------------------+
Respondent, in the several notices of deficiency, after setting forth the amounts of deficiency indicated above, attached several schedules showing the adjustments made to net income and an explanation of the adjustments. As an illustration a portion of several of these schedules taken from Docket No. 63976 is set forth below. The other dockets here involved all contained similar adjustments which followed the same pattern, differing only in amount.
(1) The net profit of $30,045.48 returned by you as a long-term capital gain from the sale of 31 lots, Pioneer Plaza, has been increased to a net profit of $32,962.83 from the sale of 31 homes. The homes are part of a single subdivision tract financed and constructed by Pioneer Plaza, Inc. The corrected net profit was received and retained by you under a claim of right and without restrictions as to its disposition.
It is held the sales were those of Pioneer Plaza, Inc., and the net profits are taxable first to it and then, as corporate distribution to you as a stockholder of Pioneer Plaza, Inc., as ordinary income under section 22(a) of the 1939 Internal Revenue Code.
In the alternative it is held that the homes were not capital assets but were held primarily for sale to customers in the ordinary course of your trade or business. The net profit from the sale is taxable as ordinary income under the provisions of section 22(a) of the Internal Revenue Code of 1939.
The capital gain of $15,022.74 (50 percent of $30,045.48) has been eliminated from your income.
In their petition in Docket No. 63976, petitioners duly assigned error to this and the other adjustments. The assigned error as to the above adjustment was in the manner set forth below and a similar assignment of error was...
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